Condos

[Jordan Freeman]

Hello again BP, I had some questions I was hoping to get some helpful answers too relating to condos as a first time home. I was recently told by many people that a great way to learn about real estate investing in the early stages would be to buy a home myself, to understand the ins and outs of home buying and ownership. So i was reading some of my old investing books to recap my knowledge and potentially bring some new ideas to light, and remembered about an idea I came across to buy a condo or town home as a rental investment and home owning experience. I thought this would be a great way to start as I not only get the ins and outs of home ownership, but i also learn what its like to be a landlord. any thoughts on this? i was also curious about if town homes are usually more expensive or not and what kind of HOA fees i would be faced with. thanks so much!

[Jeff B.]

There are Pros and Cons to learning about RE investing by purchasing a condo.

It will still have to meet all the qualifications any other investments meet as the goal is the
return on investment and cash flow.  

No disrespect to Brian but there are some good points to COA/HOA's the main one being they have rules and bylaws so that the community follows a certain set of standards. There are still tons of people who will buy or rent within an COA/HOA because they like that the who community will be maintained to a certain standard, the cost of shared amenities is spread out, there is a management company who will handle all the maintenance items on the exterior of the unit for you and usually budgets for replacement of items.

The cons of a COA/HOA is that they require an application/approval process. They may have rules on the percentage of units that can be rented. They may have community rules that are considered strict which will limit your potential rental customers. Why they have a "fiduciary duty" to maintain, budget and plan for the maintenance and replacement of items throughout the community does Not mean they are funding the reserves properly.

The amount of COA/HOA fees you will pay will be determined by the community size, amount and type of amenities, current budget, percentage funding the reserves.  The average for a couple of my rentals in Florida is between 28% and 32% of the monthly rental amount.